On June 1, 2021, President Biden announced he was launching an interagency initiative to combat bias in home appraisals. This initiative became the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE).
After a year of studies and review, the PAVE Task Force published a report on what they see as action items that would improve the current environment. One of those items is reconsideration of value (ROV).
So, what is ROV and why is it important?
- Per the Consumer Financial Protection Bureau (CFPB):
Accurate appraisals are essential to the integrity of mortgage lending. Overvaluation can decrease affordability, make it harder to sell or refinance a home and increase the risk of foreclosure. Undervaluation can prevent a homeowner from accessing accumulated equity, whether through sale or a home equity loan. Both over- and under-valuation keep individuals, families and neighborhoods from building wealth through homeownership.
- From the PAVE Task Force:
A reconsideration of value may be requested by consumers to reassess the analysis and conclusions of their initial appraisal when provided with additional information that may affect the value conclusion. Consumers can provide information to a lender during an ROV request that includes additional comparable property information and additional data pertaining to characteristics of the subject property, such as square footage. To consumers who suspect that their appraisal may have been influenced by racial or ethnic bias, an ROV offers an avenue by which they might be able to request a different valuation that results in a better outcome.
To help ensure success, the Department of Housing and Urban Development (HUD) will require Federal Housing Administration (FHA) lenders to track usage and outcomes of ROVs. This data will be reported to the FHA via FHA systems, leveraging insight from the Department of Veteran’s Affairs’ (VA) existing ROV process where helpful. This way the HUD can better identify patterns of ROV usage and evaluate the impact ROVs might have on possible discrimination.
Additionally, the National Credit Union Administration (NCUA), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller Currency (OCC) and Federal Reserve Board (FRB) will issue guidance regarding ROVs. Issues that the agencies will consider addressing in the guidance include examples of effective practices in using ROVs and whether there are any measures that lenders can take to encourage their use. Prudential regulators will also review authorities and determine the potential for rulemaking related to ROV processes, as rulemaking would drive additional accountability beyond that of the guidance.
More than a decade ago, Stewart Valuation Intelligence put policies in place that address ROVs as well as other items that we categorize as being part of the “Arbitration Process.” We review these policies with our clients, so they know what to do when a borrower or homeowner has questions about the appraisal process or results of an appraisal. SVI also understands that Appraisal Independence Requirements (AIR) must also be followed when these issues arise.
Other relevant processes include a proprietary form that helps us review any additional data and information available. Recently, the CFPB issued proposed guidelines on ROVs with a comment period that ended in August 2023. Those proposals can be found here. The FHA also has an available draft document that addresses ROVs.
A reconsideration of value is an important tool used to ensure that a home’s value is accurately reflected in an appraisal. If your organization would like to learn how SVI supports these initiatives, please contact us today.
